Follow by Email

Friday, January 31, 2014

Take
these steps to ensure you don’t have to deal with a financial crisis

In 2004, Agra-based Shabd Mishra was working with a
leading research company as its head of sales, earning a package of 7 lakh
annually. As a newly wed, he was looking forward to a bright future, when he
was sacked because of structural changes in the company. “I was left with
almost no money as I had deployed most of my savings for my wedding just a
month previously. I tried to get another job, but most companies offered a
lower salary or position, which was humiliating,” says 36-year-old Mishra.
Thankfully, he could depend on his wife, a coporate lawyer, to keep the home
fires burning. However, everybody may not be as lucky him.
How can you tell if you are likely to lose your job in
the near future, and what can you do to safeguard yourself against such an
eventuality? We spoke to a bunch of experts to help you with these dilemmas. Read the writing on the wall Financial experts explain that in most cases a pink slip doesn’t come out
of the blue. Sometimes, job loss results from employee incompetence and
negligence, and at others, it is because of inevitable, external circumstances,
such as cost-cutting measures or a change in the company management. In either
case, as Darryl Cabral, partner at Total Solutions, a Mumbai-based human
resource consultancy firm, explains, there are sure to be certain tell-tale
signs indicating an imminent job loss. “Not getting a salary increment or a
promotion is a clear indication that the management is unhappy with the
performance of the employee. So, chances are that he could be asked to leave
within a short period of time,” says Cabral. A similar strategy deployed by a
company is to look through the employee, making him feel invisible. Instances
like a junior being promoted to do an employee’s job or the latter being asked
to train a junior for his own role are red flags. What to do in such a situation? Human resource experts are of the opinion that a person should try and take
control of the situation rather than lose his cool when threatened with a
possible job loss in the near future. If the management has not yet told you to
put in your papers, you should not do it. It is possible that only your
immediate senior has problems with you, which may not matter much in terms of
your overall growth prospects in the company. By quitting hastily, you would
only make things easier for the disgruntled senior, not yourself. How to cope with a pink slip In the worst-case scenario, if a pink slip appears imminent, the best
option for the employee is to search for a better job before quitting the
present one. “An employee’s bargaining power increases if he has a job in
hand,” says Cabral. Simultaneously, you need to get your finances in order. As
a first step, you should start prioritising your expenses using financial
planning tools. After this, assess your monthly expenses and create a
contingency fund, which will take care of your day-today expenses for at least
six months. “Though a six-month period is recommended for the contingency fund,
it can be extended to around nine months if the employee falls in a high-risk
job category,” says Mukund Seshadri, founder-partner, MS Ventures Financial
Planners.If you have an outstanding debt, be it loans or credit card dues, you
will have to rejig your expenses to make sure that you continue to meet the
repayment schedule. Remember that defaulting on your debt is not an option, no
matter how dire your situation. According to Pai, the worst thing to do in the
face of a pink slip is to start disposing of one’s assets in real estate or
equities in panic. “This is a common mistake made by unemployed people,” he
explains adding that, “Selling your investment in a hurry won’t solve your
problem. How to get a new job According to Cabral, employees who get pink slips can approach their
previous company’s competitors for a job. The aspirant could also tap his
network in the industry to circulate his resume. Another thing to remember
while looking for a fresh job is to focus on a company that is smaller than the
one you were employed with. “A company that is smaller in scale than your
ex-employer would be happy to take you at a better position. This is because
you will bring in a wealth of experience, particularly relevant to a larger
set-up,” adds Cabral.
At the same time, never short-sell yourself and settle
for a lower salary or position in a bigger company. “You won’t be happy with
the drop in pay package and will constantly think of shifting to a bigger
place. This is sure to impact your productivity,” says Cabral.

2.4Ghz Intel Core i7 quad core processor, 8GB RAM, 1TB
HDD (5400rpm), Nvidia GT750 (2GB DDR5) GPU, 15.6-inch Full HD LED display,
Windows 8, DVD-RW drive, HDMI, USB 3.0
Great hardware, good performance, high quality screen,
all the ports you need, built in DVD-RW Glossy keyboard, plain looks not
to everyone’s taste, no Ultrabay accessories available in India You won’t normally find the words ‘gaming laptop’ and ‘affordable’ in the
same sentence. Lenovo’s Y510P however, manages to give you a fair amount of
bang for your buck if you’re into serious performance. It comes equipped with a
fourth gen Core i7 processor, 8GB RAM, a powerful graphics card (with 2GB DDR5
RAM), 1TB HDD, Windows 8 and a 15.6-inch, full HD LED screen. With this kind of
hardware, you won’t have a problem running any of the modern games. You could
also pair it with a controller and output it to a TV for 1080p gaming. Needless
to say, any of the more mundane tasks will also not be an issue. The problem
is, for all that the machine has by way of hardware, it looks rather plain.
Unattractive, even, in the eyes of several people who saw it. When closed it
has a brushed metallic finish that attracts a lot of smudges. It has all the
features and ports you would expect: HDMI, multiple USB (two are USB 3.0),
multi card reader, webcam and a backlit keyboard (red backlighting, with two
intensity levels). The Ultrabay design is supposed to add versatility — you can
theoretically swap out the DVD drive for another battery, a weight saver or
add-on graphics card. I say theoretically because none of these accessories are
available in India (a glaring afterthought). It’s also an oversight to put a
plain, 5400 rpm HDD into a gaming laptop. The JBL speakers deserve special
mention — paired with the built in Dolby software (equaliser, pre-sets), they
beat the sound from most laptops for loudness and clarity. Ultimately, Y510p
sorts of sits in middle ground. It’s not an out-an-out gaming laptop like an
Alienware and thanks to the plain design, it’s not very desirable either.
Casual users meanwhile, will have numerous options in the sub 50,000 range. If
you want more features, Dell will sell you the new Inspiron 15 (7000 series) with
the same specs but a way better design and 1080p touchscreen for 82,990. HITESH RAJ BHAGAT ET140120

The lesser
known desi ingredients that can add an exotic thrill to everyday cooking
Bored of the same old flavour you add to your meals
time and again? Jazz up your dishes by incorporating these unexplored
Indian ingredients you may know of but never used skillfully in your
cooking. Bathua:

Or lamb’s quarter is quite popular in
North India, where it is cultivated, and is available during the winter
months. A wild relative of the spinach plant, it is cooked in the
same way as spinach. However, it should be eaten in moderation due to high
levels of oxalic acid.

Culinary
uses: The young leaves and smaller stems can be eaten raw in salads,
added to stirfried veggies or used to make raita. Moreover, it can be used
as a stuffing in breads and pakodas. It can be mixed with other greens and
lentils to make dals. For experimentation, add it to dough to give a
distinctive taste to rotis and parathas.

Kachampuli:

Is
dark, tart vinegar which is made out of the fruit of a plant native to
Kerala and other coastal states. It is an indispensable ingredient in the
Kodava cuisine of Coorg. Every Coorg kitchen has a bottle of kachampuli,
often homemade.

Culinary
uses:
Kachampuli is usually used in the final stages of cooking, mainly in meat
and fish dishes, most famously in pork curry to lend it a special flavour.
It is a souring and thickening agent that can be used as a marinade. If
you’re using the dried form, either soak it in water for 20 minutes or add
directly to curries. Its reasonable substitute is dark brown malt vinegar,
although it will never give you the rich, dark colour of kachampuli.

Melon seeds:

Also
known as charmagaz, melon seeds are a mixture of pumpkin, cucumber,
watermelon and muskmelon seeds. Apart from having cooling properties, they
are full of vital nutrients. They lack any distinct fragrance, are nutty
and have a sweet taste. Store melon seeds in an airtight container in a dry
and dark place.

Culinary
uses
: Soak them and grind into a smooth paste when adding to Indian gravies.
The paste acts as a thickening agent. They are also added to traditional
halwas and fruit fudges for enhancing the flavour. These seeds can be dried
and roasted and treated as mouth fresheners when mixed with nuts and
spices. You can also add them to salads or use them as a topping on bread.

Golden
apple:

These
apples, with yellowcoloured skin, are a cheap substitute for mangoes. The
pulp can be eaten but has a watery base. They are the sweetest of all
varieties and are eaten raw as well as used in cooking. To store them well,
wash them and keep in perforated net bags, or zip lock bags in the
refrigerator. If you want to store a cut apple, mix lime or orange juice to
avoid browning due to oxidation. Culinary uses : They are best
used in salads to add colour and fruity taste. You can also use it to
prepare apple sauce that is added to various desserts. Or cut them into
thin slices and spread over apple pudding or apple cake as garnish. You can
also core and stuff them with various fillings. Or simply chop and add them
to a fruit cocktail.

Indian vanilla bean:

It is the second most expensive
spice after saffron. The fruit contains tiny, flavourless seeds. In dishes
prepared with whole natural vanilla, you can recognise these seeds as black
specks. Though there are many compounds present in the extracts of vanilla,
the one called vanillin is primarily responsible for the characteristic
flavour and smell of vanilla. Store vanilla beans in an airtight container
and keep them away from sunlight.

Culinary
uses:
For a vanilla flavour in food, add vanilla extract or cook vanilla pods in
the liquid preparation. For a stronger aroma, split the pods into two,
exposing more of the pod’s surface area to the liquid. In this case, the
pods’ seeds are mixed into the preparation. Apart from flavouring ice
creams, it is also used to enhance the flavour of other substances, to
which its own flavour is often complementary, such as chocolate, custard,
caramel and coffee.

Gulkand:

Is
preserved rose jam made out of a specific type of rose (damask) and sugar.
Sometimes, other ingredients like cardamom, coral and pearl powder are
added to it to increase its medicinal and cooling properties. Store gulkand
in an airtight container and keep it in the refrigerator.

Culinary
uses :
It is eaten as a constituent of paan (betel leaf) with lime and sweet
trimmings, primarily as a digestive and stress reliever. It can also be
stuffed into Indian sweets or added to kulfi or ice cream. You can also use
it to make roseflavoured teas and drinks.

Singhara:

Also
known as water chestnut, they have been cultivated in India and China since
ancient times. They are consumed in two forms: raw, roasted or steamed.
When steamed, the outside covering becomes blackened and it tastes starchy,
like a potato. Unpeeled, fresh water chestnuts will stay well for up to two
weeks in a plastic bag in the refrigerator. Prior to cooking, cut off the
top and peel the skin. If you’re peeling the skin ahead of time, make sure
to store them in cold water in the refrigerator, with the water changed
daily.

Culinary
uses
: Singhara can be powdered to be made into flour. This flour can be used to
make breads and is often used during fasting. They can also be added to
stir-fries or used as fillings in dumpling for extra texture and a sweet
flavour.

Before
you decide to invest in a tax-saving instrument, go through this guide and
rating of the most widely used options under Section 80C

Multiple options. Contradictory advice. And a
deadline that’s approaching fast. Many taxpayers find themselves in this
situation at the beginning of the year when they have to make tax-saving
investments. Are you also confused? Before you make a choice, go through
our cover story to know which is the best option for you. We have rated the
most common investments under Section 80C on five basic parameters:
returns, safety, flexibility, liquidity and taxability. The rating
separates the chaff from the grain. Whether you are a novice or a seasoned
investor, it will help you cut through the clutter and choose the
investment option that best suits your financial situation.

PUBLIC PROVIDENT FUND
The PPF is our top choice as a tax saver in 2014. It scores well on almost
all parameters. This small saving scheme has always been a favourite
tax-saving tool, but the linking of its interest rate to the bond yield in
the secondary market has made it even better. This ensures that the PPF
returns are in line with the prevailing market rates.
This year, the PPF will earn 8.7%, 25 basis points
above the average benchmark yield in the previous fiscal year. The
benchmark yield had shot up in July and has mostly remained above 8.5% in
the past six months. Although the yield is unlikely to sustain at the
current levels, analysts don’t expect it to fall below 8.25% within the
next 2-3 months. So it is reasonable to expect that the PPF rate would be
hiked marginally in 2014-15.
The PPF offers investors a lot of flexibility. You
can open an account in a post office branch or a bank. However, the
commission payable to an agent for opening this account has been
discontinued, so you will have to manage the paperwork yourself. The good
news is that some private banks, such as ICICI Bank, allow online
investments in the PPF accounts with them.
There’s flexibility even in the quantum and
periodicity of investment. The maximum investment of 1 lakh in a year can
be done as a lump sum or as instalments on any working day of the year.
Just make sure you invest the minimum 500 in your PPF account in a year,
otherwise you will be slapped with a nominal, but irksome, penalty of 50.
The PPF also offers liquidity to the investor. If
you need money, you can withdraw after the fifth year, but withdrawals
cannot exceed 50% of the balance at the end of the fourth year, or the
immediate preceding year, whichever is lower. Also, only one withdrawal is
allowed in a financial year. You can also take a loan against the PPF, but
it cannot exceed 25% of the balance in the preceding year. The loan is
charged at 2% till 36 months, and 6% for longer tenures. Till a loan is
repaid, you can’t take more.
BRIGHT IDEA
Invest before the 5th of the month if you want your contribution to earn interest
for that month as well.

ELSS FUNDS
Equity-linked saving schemes (ELSS) are at second place in our ranking.
These funds can generate good returns for investors over the long term. In
the past five years, this category has given average returns of 17.5%.
However, this potential to earn high returns comes
with a higher risk. There is no guarantee that your investment will
generate positive returns after the 3-year lock-in period. Even the best
performing funds have churned out disappointing returns in the past three
years. The returns will naturally mirror the performance of the stock
markets. Therefore, only investors who have the stomach for a
roller-coaster ride should consider this option.
Though the ELSS funds invest in equities, they are
different from other open-ended diversified equity funds. Due to the
lock-in period, the ELSS fund manager does not have to worry about
redemption pressure from investors. This gives him the freedom to invest in
shares as per his conviction and hold them for longer periods.
ELSS funds offer tremendous flexibility to
investors. The 3-year lock-in period is the shortest. Since there is no tax
on gains from equity funds after a year, an investor can safely recycle his
investments every three years and claim tax benefits on the reinvested
amount.
The minimum investment is also very low. You can
put in as little as 500 in an ELSS scheme. Unlike a Ulip, pension plan or
an insurance policy, there is no compulsion to continue investments in
subsequent years.
Since ELSS funds are a high-risk investment and
their NAVs are volatile, you need to stagger your investment over a period
of time instead of going for a lump-sum investment at the end of the
financial year.

ULIPs and NPS
For many policyholders, Ulips denote the costly mistake they made a few
years ago. But the 2010 guidelines have reformed the Ulip, turning it into
a more customer-friendly investment. Though a Ulip should not be your first
insurance policy, you can consider buying one as an investment that also
helps you save tax.
We checked Morningstar's data on Ulips and found
that the returns have not been very good in the past 5 years. But a Ulip is
not necessarily an equity-linked investment. You can also invest your Ulip
corpus in debt funds. Instead of investing in the equity option, put your
corpus in the debt fund. You can start shifting the money to the equity
fund when the prospects look rosier. Only a Ulip allows you to switch from
debt to equity, or vice versa, without incurring any capital gains tax.
Like the Ulips, the 3-year returns from the NPS
funds are also a mixed bag. While the 4.15% average returns from the E
class (equity) funds are in line with the market returns, the 6.62% from
the G class (gilt) funds are quite a disappointment. The redeeming feature
is the 10.24% returns churned out by the C class (corporate bond) funds.
Its low-cost structure, flexibility and other
investor-friendly features make the NPS an ideal investment vehicle for
retirement planning. However, even though the fund management charges have
been raised from the ridiculously unviable 0.0009% to a more reasonable
0.25%, the pension fund managers are not hardselling the scheme. If you
want to save tax through the NPS this year, be ready to do a lot of legwork
and paperwork before you can get to invest in this unique pension plan.
One of the most outstanding features of the NPS is
the ‘lifecycle fund’. Under this option, the investor’s age decides the
equity exposure. The 50% allocation to equity is reduced every year by 2%
after the investor turns 35, till it comes down to 10%.
BRIGHT IDEA
Opt for the liquid or debt fund and then shift to
the equity option as per your reading of the market.

NSCs AND BANK FDs
Many taxpayers think that up to 10,000 interest from bank deposits is
tax-free, as announced in the budget two years ago. But the newly
introduced Section 80TTA gives a deduction of up to 10,000 on interest
earned in the savings bank account, not on FDs and recurring deposits.
Also, the nomenclature ‘tax-saving deposits’ means you save tax under
Section 80C. It does not mean that these deposits are tax-free. The
interest earned on deposits is fully taxable at the normal tax rate
applicable to you. You have to mention this interest under the head ‘Income
from other sources’ in your income tax return.
So don’t get misled by the high interest rates
offered on the 5-year bank fixed deposits. The post-tax yield may not be as
high as you think. In the 20% and 30% income tax brackets, it is not as
attractive as the yield of the tax-free PPF.
The second misconception is that there is no need
to pay tax if TDS has been deducted by the bank. You may have to pay tax
even if TDS has been deducted. TDS is only 10% (20% if you haven’t
submitted your PAN details), and if you are in the 20-30% bracket, you need
to pay additional tax.
The interest on NSCs is also taxable but very few
taxpayers include it in their returns. However, with the integration of tax
records, a taxpayer may not be able to escape the tax net easily. For
instance, if you have claimed tax deduction under Section 80C for
investments in NSCs or FDs in one year, the tax department may want to know
why the interest earned is not reflecting in your tax returns for
subsequent years.
BRIGHT IDEA
Don’t try to avoid the TDS by investing in FDs of different banks. You will
have to pay the tax later anyway.

LIFE INSURANCE POLICIES
Though the Irda guidelines for traditional plans have made insurance
policies more customerfriendly by ensuring a higher surrender value and
larger life covers, they are still the worst way to save tax. The tax
saving is only meant to reduce the cost of insurance. It is not the core
objective of the policy.
Money-back and endowment plans score low on the
flexibility scale. Once you buy a policy, you are supposed to keep paying
the premium for the rest of the term. This can be a problem if you took the
policy only to save tax.
However, these policies are not as illiquid as they
appear. You can easily get a loan against your endowment policy from the
LIC. The terms are quite lenient and repayment can be done at your
convenience.
Insurance companies claim their products offer the
triple advantage of life cover, long-term savings and tax benefits. That’s
not true. Traditional plans give a low life cover of 10 times the premium.
For a cover of 25 lakh, you will have to spend 2.5 lakh a year. They also
give niggardly returns. The internal rate of return (IRR) for a 10-year policy
comes to around 5.75%. For longer terms of 15-20 years, the IRR is better
at 6.5-7.5%. As for the tax benefit, there are simpler and more
cost-effective ways to save tax, such as 5-year bank FDs and NSCs. If the
taxability of the income worries you, go for the PPF.
However, traditional insurance policies still make
a lot of sense for the HNI investor who is more concerned about the
tax--free corpus under Section 10(10d) than the deduction under Section
80C. Even for such investors, a Ulip will make more sense as they will have
control over the investment mix. The opacity of the traditional plan is
best avoided, but your agent might not be very keen to sell you a Ulip this
year because his commission has been cut to 6-7% of the premium.